In a somewhat baffling spat between the energy regulator and a new entrant energy supplier accusations are flying around that innovation is contravening rules and that the regulator is stifling progress.
That’s the situation that Ofgem and Ovo Energy have got themselves into.
The issue is around surplus monies being held in energy company bank accounts rather than finding its way back to the customers to whom it is due.
This is a known and longstanding problem. So who is the subject of Ofgem’s ire?
- The businesses sitting on multiple thousands of customer’s money, refusing to countenance its repayment and pocketing the interest or
- a start up business who offers interest payments on customer balances and the ability to withdraw surplus money at will.
Bizarrely it is the latter upon which Ofgem have chosen to focus, saying:
“Ofgem wants to see customers’ money in their pockets rather than languishing as surpluses in energy suppliers’ bank accounts. We already have detailed rules to make sure that suppliers set direct debits at the right level and surpluses are refunded.”
Ovo Energy, the subject of the action, underpin their interest payment policy by taking an early payment from customers at the start of the month for energy to be consumed rather than at the end of the month once consumption has occurred.
This, given it is a fixed direct debit, and given interest is paid on the balance doesn’t sound or feel in any way a ruse by an energy supplier to deflower customers of their money, but Ecotricity, Ovo Energy’s near neighbours in the South West and Ofgem believe the contrary.
It was Ecotricity’s complaint that triggered Ofgem to act.
Ecotricity, until Ovo Energy burst onto the scene in 2009, were the South West’s and indeed the UK’s energy supply innovators. They however no longer have that claim to themselves and fresh from a battle against the US‘s Tesla, Ecotricity have pursued another fight, this time one that is closer to home.
Dale Vince, Ecotricity’s founder also said that Ovo Energy not offering cash cheque payment options was unfair as his equally small supplier did so in line with industry rules requiring those companies supplying more than 50,000 were obligated to provide a series of defined options to customers.
Ofgem has taken the opportunity to warn Ovo Energy that the breach of its supplier license conditions must be addressed.
“We take compliance with licence conditions very seriously and have written to Ovo about areas where they must take action promptly to meet existing rules.”
Customers and suppliers affected by Ofgem’s many oversights over the last 14 years and those conducting the Competition and Markets Authority investigation will have a wry smile at Ofgem’s self conviction in that particular statemetn. However Ofgem added:
“Any household supplier that isn’t currently compliant [with the 50,000 ruling] must take steps to rectify this as soon as possible,”
Making direct reference to their approach of innovation Stephen Fitzpatrick, CEO of Ovo Energy said:
“We don’t think [Ofgem’s ruling is] in customers’ best interests, we think it’s poor regulation, but we will comply,”
Ofgem for their part admitted:
“There are rules allowing companies to charge customers upfront for their energy use but only under certain conditions. We are examining supplier practices in this area to ensure they are applying these rules correctly.”
Given Ovo Energy’s innovative approach has enabled them to offer a very real alternative to the Big 6 as well as allowing their customers to benefit from surplus balances, Ofgem’s action seems more than a little misguided.
Indeed entirely unconvincingly Ofgem took unprecedented steps in releasing a statement to claim they were not trying to outlaw a practice that was actually a unique resolution to a long-standing problem that Ofgem have consistently failed to address.
Ofgem said:
“The last thing we want to do is stop deals which truly benefit consumers. We are not banning Ovo’s offer of a 3% interest on balances. Our reforms to deliver a simpler, clearer and fairer market are flexible and allow deals such as Ovo’s where they are in consumers’ interests.
“We are currently working with Ovo on this issue to ensure that this offer stays within our framework to protect consumers, and in the meantime we have no intention of stopping Ovo from continuing to pay interest on balances.”
The last word however needs to go to Ovo Energy who, at Ofgem’s behest, have committed to:
- making clear to customers that there are different payment options,
- that they can pay for their energy in arrears and
- that now thanks to Ofgem customers may need to pay a security deposit before they sign up.
Well done Ofgem, another spectacular own goal.
I’m sorry but, on the face of it, it does look like Ofgem are in the wrong but this is incorrect.
I am an Ovo customer and I can say 100% that they are not doing this in the way that they claim. They have consistently allowed me to overpay (massively) even though my consumption dropped by 90%. They kept taking the money and didn’t revaluate the DD. It took 8 months, and ‘me’ complaining, for them change it. The website wouldn’t allow me to reduce the DD anywhere near enough so I had to waste my time calling/emailing etc etc. When I finally got through to someone to get it sorted out and get my large surplus returned to me that too was a joke. A month later I am ‘still’ waiting for hundreds of pounds and the excuses for delays don’t add up due to what I was told previously. On top of this many have complained about the ‘pay up front’ issue which is/was never made clear to me (another hidden in T&C’s job) at the time of switching to them. I know, from experience, that there is no such thing as ‘coincidence’. I thought they were a ‘good’, consumer-focussed, company when I joined….I now can’t wait to leave.
In the customer’s interest….I don’t think so. I’m with Ofgem.